Economy down but not out
Flathead takes a hit in real estate, but is poised for recovery
Two economic experts painted a glum picture of current conditions in the Flathead Valley at a Wednesday forecast session, but also said that, believe it or not, there is still hope.
Kalispell appraiser Jim Kelley and Flathead Valley Community College economist Gregg Davis spoke to a crowd of 250 people at the seventh annual Flathead forecast sponsored by Montana West Economic Development.
Kelley said the number of homes sold in the Flathead had dropped to near-historic lows in 2008, falling below 1998 levels and creeping dangerously close to 1989's torpor.
With substantial layoffs in all its major industries except health care and social services, Flathead County's unemployment rate hit 8.7 percent in December, making it the fourth highest in Montana and putting it in the company of Lincoln, Sanders, Glacier and Mineral counties - an unheard-of association in recent years. Flathead's rate is more than 50 percent higher than Montana's 5.4 percent unemployment and a point-and-a-half above the national rate.
Housing affordability also sunk to new lows in 2008, with the average house here selling for five times the median worker's wage.
The number of land sales plummeted to a paltry 350 or so last year after spiking above 1,300 in 2005, which led Kelley to remark, "It's just fallen off a cliff." The last time it did that, in 1997 when transactions dipped just below 500, it took seven years to dig back out of the hole.
This time around, however, it doesn't have to be that bad. Davis, in fact, said the Flathead is well-poised for recovery.
"Montana has some good traits," he said. Kalispell has a diversified economy, he reminded the crowd, as well as an educated labor force, a community college for re-training, beautiful scenery, and is a regional retail center.
If that's not enough to convince you that people still will want to come here, he said, think about Montana's natural resources that will be back in demand as the global economy rebounds. Besides, entrepreneurs and their indomitable spirit are what Montana is made of.
Later he admitted to a bit of Pollyanna-ism, but said he needed to inject optimism in the business-centered crowd.
The housing slow-down has certainly dampened both the economy and spirits locally.
Kalispell subdividing activity and home construction each flattened out from 2007 to 2008, Kelley said. The number of new lots created outstripped the number of residential units built every year since 2003, except 2007 when it was nearly equal.
Flathead County's situation was even more drastic.
Every year since 2000, far more lots were created in the county than homes were built on the sites. The widest disparity came in 2005 with 951 new lots and only 376 new homes. The trend had left more than 3,400 lots sitting empty across the county by the end of 2008.
Selling prices were off, too. All homes, including the high-dollar Flathead Lake-front homes, lost 4.4 percent of their median price in 2008; the median non-lakefront home lost 3.6 percent of its value.
But the number of those that sold was more telling: In 2008, the number of all homes sold was off 27.5 percent and the number of non-lakefront homes sold was off 25 percent. The decline started in 2006, he said, and hasn't stopped yet.
"There's a point where sellers just won't sell," Kelley said, particularly if they still owe more than they can get for it.
It all leads to an intimidating inventory of homes on the market that aren't selling.
The quickest sellers now are those between $100,000 and $200,000; at the rate they sold in 2008 it would take just under 11 months to sell them all. Houses under $100,000 have a 16-month inventory, and the inventory edges up in every other price category, too - just over 13 months for $200,000-$300,000, almost 29 months for $300,000-$400,000 and so on. The highest-end homes, listing for $2 million and up, wouldn't all sell for another 13 years.
And all this, plus other factors such as a home's affordability compared against income and mortgage rates and terms, means a lot more foreclosures.
In 2006, Kelley said the county recorded 207 notices of trustee's sale - that's what happens when a homeowner defaults - but 81 percent of those were canceled when the homeowner either made good on the mortgage or managed to sell the property himself. It was 290 notices the next year, with 85 percent of them canceled.
But the number of notices skyrocketed to 477 in Flathead County last year, and only 51 percent of them were canceled. It ended in 130 foreclosed homes, commercial property, time-shares and land.
That translated to 5.9 foreclosures for every 1,000 properties, far higher than Montana's 2.2 foreclosures per 1,000 properties. Along with that, owners had to settle for declines of 10 percent, 20 percent and even 30 percent since their property's last selling price, according to Kelley's figures through March 2007.
But it also impacted prices on the broader market. The median home price grew by 18 percent in 2005 from the year before, then by 11 percent in 2006 and by 2 percent in 2007, until it finally dropped by more than 4 percent last year.
Reporter Nancy Kimball may be reached at 758-4483 or by e-mail at nkimball@dailyinterlake.com